Paxos, the operator of Binance-backed stablecoin BUSD may be charged by the United States regulator Securities and Exchange Commission (SEC) for listing the token which it termed an unregistered security. According to a Wall Street Journal, the possibility of an enforcement action exists especially as the offense is categorized as a violation of customer protection laws.
The letter which the SEC sent to Paxos as a form of notification also known as Wells notice confirms that this is not a final decision that the regulator will progress with legal enforcement. Instead, a response explaining why the SEC should not continue with the lawsuit would be expected. However, leading digital asset service provider Binance clarified that Paxos solely owns and issues the United States dollar-pegged stablecoin.
Paxos has been the issuer of the BUSD since 2019 when it inked a partnership with Binance at the time. The decision was then approved by the New York State Department of Financial Services (NYDFS).
“Binance licenses its brand to Paxos for use with BUSD, which is entirely owned by Paxos and regulated/supervised by the NY Department of Financial Services,” a spokesperson for Binance said in an email statement.
“Stablecoins are a critical safety net for [cryptocurrency] investors seeking refuge from volatile markets and limiting their access would directly harm millions of people across the globe. We will continue to monitor the situation,” the email explained while also confirming that there are a few flaws with the system that has led to the undercollateralization of the stablecoin.
U.S Regulators in Hot Pursuit of Crypto Firms
The SEC has become more vested in uncovering the shams put up by crypto operators in recent times. It is not certain if this renewed push is connected to the clampdown of Sam Bankman-Fried’s FTX exchange which happened about three months ago or not.
However, the concerns have heightened since that time. Kraken was also fined $30 million for failure to register the offer and sale of their crypto-staking programs.
Amidst this trouble, Paxos is also being investigated by the NYDFS for some undisclosed regulatory scrutiny. For now, no exact crime has been pinned on the crypto firm by the regulator.
